As a business owner, it is good practice to take advantage of as many tax deductions as possible. By doing so, you lower your taxable income and are able to keep more money in the business.
While some deductions are simple to take advantage of, others require more attention. In other words, you need to pay close attention to every step you take. You need to comply with all requests of the IRS to lessen the chance of an audit and potentially owing additional money.
Below are several business tax deductions that require special attention:
1. Business Meals and Entertainment
You must have a business purpose for this type of expense to be tax deductible. Furthermore, you are only permitted to deduct 50 percent of the total expense.
For example, a dinner with a client is typically considered a deductible expense. Be sure to do the following:
- Save the receipt.
- Record the name of the person you entertained.
- Record the purpose of the meeting.
2. Automobile Mileage
Small business owners love this tax deduction, but it requires special attention on your end. You have the right to deduct for all miles accumulated for business reasons, but it is a must to keep record of:
- Starting and ending mileage.
- Purpose of the business trip.
Note: you may also want to make note of anybody you met with, for business reasons, along the way.
Just because a business tax deduction requires special attention does not mean you should avoid using it to your advantage. It simply means you should pay close attention to what is required of you. If for any reason you are audited, it is important to have this information at your disposal. It can go a long way in proving that your deductions were legitimate.